KHEM CHAND KHATRI,JODHPUR vs. DCIT, CENTRAL CIRCLE-1, JODHPUR

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE DR. MITHA LAL MEENA, HON’BLE ACCOUNTANT MEMBER AND SHRI SUDHIR PAREEK, HON’BLE JUDICIAL MEMBER ITA Nos. 556, 557 & 558/Jodh/2024 (Assessment Years – 2015-16, 2016-17 & 2017-18) Khem Chand Khatri Deputy Commissioner of Income P. No. 136, Near Bhagat Ki Kothi Tax, Central Circle-1, Railway Station, New Pali Road, Jodhpur Jodhpur-342001 PAN No. ABYPC 5905 F Assessee by Shri Amit Kothari, CA (Physical) Revenue by Shri Bhawani Shankar Mathur, DCIT-DR (Virtual) ITA No. 662/Jodh/2024 (Assessment Year – 2017-18) Deputy Commissioner of Khem Chand Khatri Income Tax, Central Circle-1, P. No. 136, Near Bhagat Ki Kothi Jodhpur Railway Station, New Pali Road, Jodhpur-342001 PAN No. ABYPC 5905 F Assessee by Shri Amit Kothari, CA (Physical) Smt. Seema Meena, CIT-DR (Virtual) Revenue by Date of Hearing 19 / 05 / 2026. Date of Pronouncement 03 / 06 / 2026. ORDER PER BENCH: These appeals by the assessee and the department are filed against the order of Ld. Commissioner of Income Tax Appeals, Jaipur-5 [hereinafter referred

2 ITA Nos. 556,557,558 & 662/Jodh/2024 Asst. Years: 2015-16 to 2017-18 to CIT(A)] dated 14.06.2024, 27.06.2024 with respect to Assessment Year 2015-16 to 2017-18.

ITA No. 556/Jodh/2024 (Assessment Year: 2015-16)

ITA No. 557/Jodh/2024 (Assessment Year: 2016-17)

ITA No. 558/Jodh/2024 (Assessment Year: 2017-18)

3 ITA Nos. 556,557,558 & 662/Jodh/2024 Asst. Years: 2015-16 to 2017-18 1. The Id. CIT(A) has erred in sustain the initiation of proceedings u/s 148 which is bad in law and bad on facts. The initiation of proceedings u/s 148 on the basis of valuation report is bad in law and bad on facts. 2. The ld. CIT(A) has erred in sustaining the addition of Rs. 1,23,56,912/- for alleged difference in stock found during the course of survey. The addition so sustained is bad in law and bad on facts. 3. The ld.CIT(A) has erred in sustaining addition of Rs. 24,92,824/- on account of difference in cost of construction as declared in the regular books of accounts and as estimated by DVO. The addition so sustained is bad in law and bad on facts. 4. The ld. CIT(A) has erred in sustaining the action of ld. AO in charging tax at special rates u/s 115BBE. 5. The appellant crave liberty to add, amend, alter, modify, delete any of the ground of appeal on or before its hearing before your honours.

ITA No. 662/Jodh/2024 (Assessment Year: 2017-18)

(i) Whether on the facts & in the circumstances of the case, the Ld. CIT(A) has erred in restricting the addition of Rs.2, 15,85,106/- to Rs. 1,23,56,912/ made by AO on account of unexplained stock without considering the fact that during survey the assessee accepted the valuation and did not make any statement that the stock was valued on the market price. (ii) Whether on the facts & in the circumstances of the case, the Ld. CIT(A) has erred in restricting the addition of Rs.3,14,63,877/- to Rs.24,92,824/-made on account of unexplained investment without considering the fact that the investment in factory building was not shown by the assessee in his audited chart of fixed assets as on 31.03.2017. (iii) The appellant craves leave to add, amend or withdraw any of the ground of appeal during the course of appellant proceeding.

4 ITA Nos. 556,557,558 & 662/Jodh/2024 Asst. Years: 2015-16 to 2017-18 5. In the first ground of appeal, the appellant assessee has raised common issues challenging validity of initiation of proceedings u/s 148 thereby validity of assessment order passed u/s 143(3) r.w.s. 147 of the Income Tax Act with respect to all the three assessment years 2015-16, 2016-17 and 2017-18 in ITA Nos. 556/Jodh/2024, 557/Jodh/2024 and 558/Jodh/2024.

5.1 Briefly the facts of the case as per record are that the appellant assessee had filed the original return of income declaring total income of Rs. 2,63,93,680/- and the scrutiny assessment was completed u/s 143(3) of the Act on 12.07.2017. Subsequently, proceedings u/s 147 of the Act were initiated based on valuation report obtained from the Departmental Valuation Officer (in short the “DVO”) alleging under statement in cost of construction in relation to property situated at plot no. 2 and 3, Bhagat Ki Kothi, Jodhpur.

5.2 The Ld. Counsel for the assessee had submitted that in the present case, the reopening has been initiated solely based on DVOs valuation report without there being any independent tangible material available with the AO to form a bona fide belief that income chargeable to tax has escaped assessment. It was further submitted that original assessment had already been completed u/s 143(3) after scrutiny and examination of the books of account relating to

5 ITA Nos. 556,557,558 & 662/Jodh/2024 Asst. Years: 2015-16 to 2017-18 construction expenditure which were produced before the AO during the course of assessment proceedings. The Ld. AO did not point out any defect what so ever in the books of account maintained by the assessee.

5.3 The AR contended that reassessment proceedings are merely based upon change of opinion as there was and no incriminating material relating to the years under consideration was found during the course of survey proceedings suggesting any unexplained investment construction. In support he placed reliance on the judgment of Hon’ble Supreme Court in the case of ACIT Vs. Dhariya Construction Company (2010) 328 ITR 515 (SC), Hon’ble Rajasthan High Court in the case of Tara Chand Mundhra Vs. Union of India (2000) 163 CTR (Raj.) 631 reported in 245 ITR 187 (Raj.), CIT Vs. Smt. Meena Devi Mansinghka (2008) 303 ITR 351 (Raj.) reported in 212 CTR (Raj.) 23 rajasthan and other judicial precedents.

5.4 On the other side, the Ld. DR supported the impugned order of the lower authorities and submitted that DVOs valuation constituted material available with the AO formation of belief regarding escapement of income. The DR has made reference to assessment year 2017-18 pursuant to the proceedings of survey conducted, and argued that the proceedings were validly initiated.

6 ITA Nos. 556,557,558 & 662/Jodh/2024 Asst. Years: 2015-16 to 2017-18 5.5 We have heard both the sides, perused the material available on record and gone through the orders of the authorities below. It is an undisputed fact that in the present case, the original assessment was completed u/s 143(3) after scrutiny and examination of books of account by the AO. It is also undisputed fact on record that reopening proceedings have been initiated solely based on the valuation report of DVO. The Hon’ble Supreme Court in the case of ACIT Vs. Dhariya Construction Company (supra) has categorically held that opinion of DVO per se is not an information for the purposes of reopening of assessment u/s 147 and the Assessing Officer is required to independently applied his mind to the information available on record. Similar view has been taken by the Rajasthan High Court in the case of Tara Chand Mundhra Vs. CIT (supra) and the CIT Vs. Smt. Meena Devi Mansinghka (supra).

5.6 From the record, it is evident that no independent material has been brought on record by the AO to establish that any income chargeable to tax had escaped assessment for the year under consideration. In the present case, the reassessment proceedings have admittedly been initiated merely based on the estimated value as per valuation report of the DVO. It is noted that books of account maintained by the assessee was never rejected either during the original

7 ITA Nos. 556,557,558 & 662/Jodh/2024 Asst. Years: 2015-16 to 2017-18 assessment proceedings or during the reassessment proceedings by the AO. In our considered view, reopening of the completed assessment merely based on DVOs valuation report without any independent tangible material amounts to mere change of opinion, which is impermissible in law.

5.7 Respectfully, following the judgment of the Apex Court (supra) and the Jurisdictional High Court (supra), we hold that reassessment proceedings u/s 147/ 148 is invalid and bad in law. Accordingly, the reassessment proceedings with respect to assessment year 2015-16, 2016-17 and 2017-18 are as such quashed. Thus, the ground no. 1 is allowed.

6.1 The AO made an addition of Rs. 2,75,319/- on account of alleged unexplained investment on construction based on valuation report of DVO.

8 ITA Nos. 556,557,558 & 662/Jodh/2024 Asst. Years: 2015-16 to 2017-18 6.2 The Ld. AR submitted that complete books of account along with supporting bills and vouchers of expenditure was maintained by the assessee in regular course of business and no defect what so ever has been pointed out in the books of account. It was submitted that without rejection of books of account, reference made to DVO u/s 142A itself was invalid. In support, he placed reliance on the judgment of Hon’ble Supreme Court in the case of Sargam Cinema Vs. CIT (2010) 328 ITR 513 (SC), CIT Vs. Pratap Singh Amro Singh Rajendra Singh and Deepak Kumar (1993) 200 ITR 788 (Raj) and other judicial precedents. It was further submitted that valuation report of DVO is merely estimated valuation and cannot override actual expenditure duly recorded in the books of account. The assessee also submitted that DVO had adopted PWD rates whereas the local PWD/BSR rates ought to have been adopted and further adequate deduction for the self-supervision ought to have been allowed.

6.3 Per contra, the Ld. DR relied on the assessment order and the impugned order. He has filed a written note reiterating the observation made by the AO in the assessment order. However, he did not controvert the factual argument and contention raised by the Ld. AR with supporting evidence.

9 ITA Nos. 556,557,558 & 662/Jodh/2024 Asst. Years: 2015-16 to 2017-18 6.4 Having considered the rival submissions and perusal of the material available on record, we find merit in the contention of the assessee that AO has not rejected books of account maintained by the assessee before making reference to the DVO. The Hon’ble Supreme Court in the case of Sargam Cinema (supra) has categorically held that without rejection of books of account, reference to DVO is not valid. It is further noted that assessee has maintained complete books of account supported by bills and vouchers and no specific defects has been pointed out by the Assessing Officer therein. Addition have been made solely based on the estimated valuation report. We concur with the contention of the assessee that local PWD ought to have been adopted instead of CPWD rates. The Hon’ble Rajasthan High Court in the case of CIT Vs. Hotel Joshi (2000) 242 ITR 478 (Raj) held that local PWD rates are to be preferred over CPWD rates while estimating the cost of construction. Further the reasonable deduction to the appellant for self-supervision charge would also required to be granted to the assessee. The Assessing Officer has allowed deductions @ 5% only as against 10 to 15% deductions permissible depending upon facts of each case as per the judicial precedents.

10 ITA Nos. 556,557,558 & 662/Jodh/2024 Asst. Years: 2015-16 to 2017-18 6.5 Considering the peculiar facts of the case and respectfully following the judicial precedents, referred to hereinabove, we hold that the addition made by the AO merely based on DVOs valuation report without rejection of books of account is unsustainable in law. Accordingly, the addition made on account of alleged unexplained investment to cost of construction is deleted.

7.1 The appellant submitted that employees contribution towards PF had been deposited before the due date of filing of return of income u/s 139(1). It was further submitted that amendment brought by the Finance Act, 2026 in parallel Section 29(1) of the Income Tax Act, 2025, by Finance Act, 2026 on which a said Section have been amended by the certain clause ai which states that if the amount of employees contribution is paid before due date of filing return of income then no addition will made to such default. It is also contended by the Ld. AR that by the same financial year 2026 amendment made introducing clarificatory provisions into the IT Act with regards to notices issued by the JAO and Hon’ble Supreme Court in diary no. 32669/2025 in their order dated 10.04.2026 have held such provisions being clarificatory in nature will be applied

11 ITA Nos. 556,557,558 & 662/Jodh/2024 Asst. Years: 2015-16 to 2017-18 retrospectively. The contention of the appellant was that similar clarificatory amendment made in the provisions should be applied to the pending assessments.

7.2 On the other side, the Ld. DR relied on the impugned order, however, he did not controvert the contentions of the appellant.

7.3 Admittedly, the amendment brought in the Finance Act, 2026 is clarificatory in nature with regards to the notices issued by the JAO which are applicable retrospectively. In view of the latest decision of the Hon’ble Supreme Court (supra), the payment of the statutory due on account of employees contribution being paid before the due date of filing of the return of income, the disallowance made u/s 36(1)(va) is deserves to be deleted. Accordingly, the disallowance of Rs. 27,634/- made u/s 36(1)(va) is deleted. Thus, the ground no. 3 of the appeal is allowed.

12 ITA Nos. 556,557,558 & 662/Jodh/2024 Asst. Years: 2015-16 to 2017-18 DVOs report in ITA No. 558/Jodh/2024 with respect to assessment year 2017-18 are exactly identical on facts to that discussed in ITA No. 556/Jodh/2024 with respect to assessment year 2015-16 except variation in quantum of disallowance, therefore, our observation and findings given in ITA No. 556/Jodh/2024 shall be applicable to the appeals in ITA Nos. 557/Jodh/2024 and 558/Jodh/2024 in mutatis mutandis, ordered accordingly.

ITA No. 558/Jodh/2024 Assessment Year 2017-18 of the assessee and ITA No. 662/Jodh/2024 Assessment Year 2017-18 of the department.

9.1 Facts as per record are that the survey proceedings were carried out on 19.09.2016 by the Department where the survey team has inventorised the physical stock found at the premises of the assessee with some difference in the stock. The Assessing Officer (in short “the AO”) has observed that assessee has

13 ITA Nos. 556,557,558 & 662/Jodh/2024 Asst. Years: 2015-16 to 2017-18 admitted excess stock found during the course of survey proceedings but while filing the return of income, he had declared only Rs. 54,29,218/- on account excess stock. Accordingly, the AO had worked out alleged excess stock at Rs. 2,70,14,327/- and after reducing the amount already offered by the assessee for taxation in the return of income, an addition of Rs. 2,15,85,106/- was made.

9.2 The Ld. CIT(A) has reworked out the stock and sustained the addition of Rs. 1,23,56,921/- and deleted the balanced addition.

9.3 The Ld. Counsel for the assessee has referred to the working of the AO for making the addition as under:

Trading account as on date of Survey:

Opening stock 45087960 Sales 256481872 Purchases 238563713 Closing Stock 60873234 Direct Expenses 6798404 Gross Profit (10.48%) 26904939 Total 317355016 317355016

Physical stock found at the time of survey 87887558 Working of stock as per Trading account prepared at the 60873234 time of survey Difference in stock 27014324

14 ITA Nos. 556,557,558 & 662/Jodh/2024 Asst. Years: 2015-16 to 2017-18 9.3.1 The appellant submitted that the AO has accepted the trading results declared by the assessee for the year under consideration and once the trading results have been accepted, there remains no justification for making separate addition on account of stock difference based on mid-year survey. It was also submitted that certain purchase and sales entries were pending to be incorporated in the books of account at the time of survey proceedings and that complete details thereof were subsequently furnished during assessment proceedings. The re-casted trading account submitted by the appellant during the course of assessment proceedings is as under:

Trading account upto 20.9.2016:

Opening stock 45087960 Sales 281900517 Purchases 271573022 Closing Stock 73230146 Direct Expenses 8919110 Gross Profit (10.48%) 29550570 Total 355130663 355130663

9.4 It was further submitted that stock taken during survey was valued at selling price instead of cost price and, therefore, an appropriate adjustment towards gross profit margin was required to be made. The assessee furnished re-casted trading account upto date of survey and demonstrated that after considering pending purchase and sales entries and reducing gross profit element from stock valued at

15 ITA Nos. 556,557,558 & 662/Jodh/2024 Asst. Years: 2015-16 to 2017-18 selling price, actual excess stock worked out only to Rs. 54,29,218/- which had already been duly offered for tax by the assessee. The working of the difference was made as under:

Physical stock as taken during the survey proceedings valued at selling price 87887558 Less : Gross profit margin 10.50% 9228194 Physical Closing stock at cost 78659364 Less : Closing stock as per trading account 73230146 Difference in stock which was included in income 5429218

9.5 The appellant further submitted that the physical stock determined during survey proceedings was itself based on estimates and could not be treated as accurate for scientific determination. Reliance was placed upon the judgments of Hon’ble Rajasthan High Court in Malani Ramjivan Jagannath vs. ACIT reported in 207 CTR (Raj) 19 and CIT vs. Gotan Lime Khanij Udyog reported in 169 CTR (Raj). The Ld. AR contended that the CIT(A) accepted part contention of the appellant that the stock was taken at market price, therefore the gross profit element from the same should be reduced from the cost. However, the working of re-casted trading made by the assessee that certain purchases and sales were not recorded

16 ITA Nos. 556,557,558 & 662/Jodh/2024 Asst. Years: 2015-16 to 2017-18 and that the stock as per revised working should be taken, but it was not accepted by the Ld. CIT(A) and the addition was worked out by him as under:

Physical stock as taken during the survey proceedings valued at selling price 87887558 Less : Gross profit margin 10.50% 9228194 Physical Closing stock at cost 78659364 Less : Closing stock as per trading account prepared by AO during survey 60873234 Difference in stock 17786130 Excess stock offered by assessee in his return 5429218 of income Difference in stock as sustained by CIT(A) 12356912

Therefore, the AR requested that once the stock was taken at market price, the gross profit element from the same should be reduced from the cost and due justified relief may be granted thereof.

9.6 On the other hand, the ld. DR relied on the impugned order but he did not controvert the factual contention of the appellant.

9.7 We have considered rival submissions and perused the material available on record on the issue of valuation of stock on physical verification. We find merit in the contention of the assessee that the AO has accepted the trading results

17 ITA Nos. 556,557,558 & 662/Jodh/2024 Asst. Years: 2015-16 to 2017-18 declared by the assessee. The purchases and sales recorded in books of account have not been doubted. We further find that the assessee had explained that certain purchase and sales entries were pending to be incorporated at the time of survey and detailed reconciliation along with re-casted trading account was furnished before the AO. It is also seen that if the comparative figures of the re- casted trading account is seen the assessee has shown higher sales, purchases and gross profits as against what was worked out by the survey team, and the position as on 20.9.2016 of the stock would be as under:

As computed by Shown by As computed Shown by AO assessee by AO assessee Opening 45087960 45087960 Sales 256481872 281900517 stock Purchases 238563713 271573022 Closing 60873234 73230146 Stock Direct 6798404 8919110 Expenses Gross Profit 26904939 29550570 (10.48%) Total 317355016 355130663 317355016 355130663

9.7.1 From the above, it is evident that there was increase in purchases and simultaneously there was corresponding increase in sales. There is also increase in working profits. We find from the various details filed during the course

18 ITA Nos. 556,557,558 & 662/Jodh/2024 Asst. Years: 2015-16 to 2017-18 assessment proceeding that all these purchases and sales were supported with purchase bills and supporting documents. We find force in the contention of the assessee that physical stock inventorised during survey proceedings was valued at selling price and therefore appropriate deduction towards gross profit margin was required to be granted while comparing the same with stock reflected in books of account maintained at cost. The assessee has demonstrated that after reducing gross profit element and considering pending entries, actual excess stock worked out to Rs. 54,29,218/- only which had already been offered to tax in return of income. It is noted that the AO has not pointed out any defect in the reconciliation furnished by the assessee except that the higher amount was offered during the survey proceedings. Thus, in our view, the addition has been made merely based on assumptions and incorrect working of gross profit percentage.

9.7.2 In view of the above facts and circumstances and respectfully following the judicial precedents (supra) we hold that the addition sustained by CIT(A) was not justified and that the ground of revenue objecting to the part relief granted by the CIT (A) has no merits and it is not found to be on logical footings. Accordingly,

19 ITA Nos. 556,557,558 & 662/Jodh/2024 Asst. Years: 2015-16 to 2017-18 Ground No.2 raised by the assessee is allowed and the ground 1 of the department is dismissed.

10.1 The appellant submitted that the assessee had maintained complete books of account supported by regular bills and vouchers in relation to construction activities and all details relating to investments in various properties had been duly furnished before the AO. It was submitted that the AO had not pointed out any discrepancy in books of account and without rejection of books of account, reference made to DVO u/s 142A itself was invalid. Reliance was placed upon the judgments of Hon’ble Supreme Court in Sargam Cinema vs. CIT reported in 328 ITR 513 (SC), CIT vs. Pratap Singh Amro Singh Rajendra Singh reported in 200 ITR 788 (Raj), CIT vs. A.L. Homes reported in 401 ITR 285 (Mad), CIT vs. Freedom Board & Paper Mills reported in 231 Taxman 719 (P&H) and various other judicial precedents. It was further submitted that the DVO had adopted CPWD rates whereas local PWD/BSR rates ought to have been adopted. The assessee also

20 ITA Nos. 556,557,558 & 662/Jodh/2024 Asst. Years: 2015-16 to 2017-18 claimed deduction towards self-supervision at 10% to 15%. The appellant further submitted that no incriminating material whatsoever was found during survey proceedings indicating investment over and above the amounts recorded in books of account.

10.2 The appellant also submitted that the valuation of the various properties in question had been made by the DVO on the basis of CPWD rates and no deduction for self-supervision had been considered by him. If we look at the total cost of construction as estimated by the DVO, we find that the following working had been made, if the deduction on account of difference in valuation of CPWD and PWD rates, and that self-supervision is allowed then the difference would be very negligible which is on account of bona fide error of estimates being made.

Name of Property Value declared by Value adopted by Assessee DVO Plot No. 211, Ashapurna Enclave, 92,35,881 97,98,478 Jodhpur Plot 285, Shastri Nagar, Jodhpur 2,06,89,915 1,77,45,991 Plot 73 & 80 Salawas Road, 1,34,11,375 3,58,97,300 Jodhpur Plot No. 10,11,11A Tanawara 2,86,37,407 2,62,08,661 Fanta, Salawas Jodhpur Plot No. 2 &3 Bhagat ki kothi, 11,98,657 30,50,748 Jodhpur.

21 ITA Nos. 556,557,558 & 662/Jodh/2024 Asst. Years: 2015-16 to 2017-18 Total 7,31,73,235 9,27,01,178 Less : Deduction on account of 1,85,40,236 difference in Valuation done as per CPWD as against PWD rates Less : Deduction on account of 92,70,118 self-supervision @ 10 % Net Valuation if local PWD 7,31,73,235 6,48,90,824 schedule is adopted.

10.3 Thus, it was contended by the appellant that there was no difference in the value declared by the assessee and the value adopted by the DVO. Therefore, the entire addition made was not justified. Further it is also stated that the addition which had been made by the AO was apparently incorrect without appreciating the facts, which had been also accepted by the CIT(A), but still part addition was sustained. The appellant referred to the assessment order page 19 to show how the incorrect working has been made for making the addition. It is pointed out that the opening Balance of Factory Building has been taken at Rs.1,78,22,945/- which comprises of following balances:

a. Factory Building Tanawara 74 58,84,193.00 b. Factory Building 4,76,344.80 c. Factory Building Sangariya 5,25,365.00 d. Factory Building Plot No. 73 1,09,37,042.00 Land 36,99,940.00

22 ITA Nos. 556,557,558 & 662/Jodh/2024 Asst. Years: 2015-16 to 2017-18 Factory Bldg. 1,09,37,042.00 Total Opening 1,46,36,982.00 1,78,22,944.80

The total additions has been taken as Rs. 2,16,49,837.00 and the details of the same are as under:

a. Factory Building 10,11 &11A 1,91,41,514.00 b. Factory Building 73 & 80 1,34,11,375.00 Op. Bal. Transferred (1,09,37,042.00) 24,74,333.00 2,16,15,847.00 Sangariya 33,990.00 2,16,49,837.00 The details of Addition as per the financial statements was as under : More than 6 Months (16,60,832.00+33,18,546.00) 49,79,378.00 Less than 6 Months 1,66,70,459.00 2,16,49,837.00 10.4 The Ld. AR pointed out an apparent error in the working of the amount of addition made by the AO, which has also been stated by the CIT(A) in his order as summarized here under:

23 ITA Nos. 556,557,558 & 662/Jodh/2024 Asst. Years: 2015-16 to 2017-18 Particulars Amount Remarks Factory Building Opening 2,16,49,837 The amount of additions are correct and 17822945 pls addition this is representing more than 6 months 4979378 and 16670459) and less than 6 months as submitted above. House at Shastri Nagar 62,70,669 This amount is not appearing in Tax Audit report as no depreciation is being claimed on residential house. But this addition is appearing in the fixed assets chart. Account copy submitted. This was also considered by AO. Construction of Factory Figure of 1,80,18,512/- is after Building depreciation. Gross Rs. 1,91,41,514/- 10/11/11A 1,80,18,512 minus depreciation Rs. 11,23,002/-. This addition is already included in the above figure of addition) Factory 73 & 80 1,34,11,375 Figure of 1,34,11,375/- is also after depreciation. Kindly see p.b. 72. Gross value 1,34,11,375 minus depreciation Rs. 13,00,462. (this is also already included in the above figure in opening and in addition) Appellants Clarification of addition of Rs. 2,16,15,847/- : Factory Building 10/11/11A : 1,91,41,514/- Factory Building 73 & 80 : 1,34,11,375/- Less : Opening balance trs. To 73 & 80 : (-)1,09,37,042/- Total Addition : 2,16,15,847/- Add : Factory Sangaria : 33,990/- Total addition : 2,16,49,837/-

At Sangaria 33,990/- P.b. 73. This figure has been taken twice. It is already included in the figure of Rs. 2,16,49,837.

24 ITA Nos. 556,557,558 & 662/Jodh/2024 Asst. Years: 2015-16 to 2017-18 10.5 It was submitted that the figures of Rs. 1,80,18,512/- and Rs. 33,990/- taken by the AO separately is already included in the amount of addition of Rs. 2,16,49837/- and has been wrongly taken twice. It can be seen that the addition has been wrongly made, and the ld. AO has wrongly computed the figures of additions as per books and made the addition. The figure of Rs. 1,34,11,375/- is also included in the opening balance amount of addition as shown in the chart above. Thus, the addition of Rs. 3,14,63,877/- (Rs.1,80,18,512/-, Rs. 1,34,11,375, and Rs. 33,990/-) has resulted into double addition of the same amount already included and is an apparent error in making the addition. The CIT(A) also observed in impugned order at page 27 that these figures had been wrongly taken twice and had deleted the said addition. But in relation to the addition made, regarding plot no. 73 & 80 for Rs. 66,22,876/-, he has sustained the addition of Rs. 24,92,824/-. The Ld. AR pleaded that same may be deleted.

10.6 The Ld. DR relied on the impugned order, but he did not controvert the factual contention of the appellant.

10.7 We have considered rival submissions and carefully gone through the material available on record. Apparently, it is seen that the addition made by the AO of Rs. 3,14,63,877/- is seen on double consideration of same amounts of

25 ITA Nos. 556,557,558 & 662/Jodh/2024 Asst. Years: 2015-16 to 2017-18 income and the said addition was rightly deleted by ld. CIT(A). However, we don’t find any valid reason in the decision of the CIT(A) in sustaining the addition of Rs. 24,92,824/- which was not the subject matter of dispute before him and further when the additions made had been fully found to be explained there was no justification of making any addition. It is an admitted fact that the assessee had maintained complete books of account relating to construction expenditure and such books were supported by bills and vouchers. We further note that the AO has not rejected the books of account nor pointed out any specific defect therein before making reference to DVO. The Hon’ble Supreme Court in the case of Sargam Cinema (supra) has categorically held that without rejection of books of account, reference to DVO is not valid. Similar view has been consistently taken in various judicial precedents relied upon by the assessee. We also find force in the contention of the assessee that local PWD rates ought to have been adopted instead of CPWD rates. The Hon’ble Rajasthan High Court in the case of CIT vs. Hotel Joshi reported in 242 ITR 478 (Raj) has held that local PWD rates are to be preferred while estimating cost of construction. Further, reasonable deduction towards self-supervision is also required to be granted considering the nature of construction activity and direct involvement of the assessee in procurement of

26 ITA Nos. 556,557,558 & 662/Jodh/2024 Asst. Years: 2015-16 to 2017-18 material and supervision of construction work. The valuation made by the DVO is merely an estimate and estimated valuation cannot override actual expenditure duly recorded in books of account maintained in regular course of business.

10.7.1 In view of the above facts and circumstances and respectfully following the judicial precedents referred to hereinabove, we hold that the addition of Rs. 24,92,824/- sustained by CIT(A) was not justified and as such, we delete the addition of Rs. 24,92,824/-. Further, we find no merits in the revenue appeal as the relief allowed by CIT(A) has been justified and as such revenue ground is dismissed.

10.7.2 Accordingly, the entire addition made by AO was not justified, and is directed to be deleted. Thus, Ground No.3 raised by the assessee is allowed and the ground 2 of the department is rejected.

11.2 The Ld. Counsel further submitted that the AO has accepted the trading results declared by the assessee for the year under consideration and once the trading results have been accepted, there remains no justification for making

27 ITA Nos. 556,557,558 & 662/Jodh/2024 Asst. Years: 2015-16 to 2017-18 separate addition on account of stock difference based on midyear survey. The AR further submitted certain purchase and sales entries were pending to be accounted for in the books of account at the time of complete details were subsequently furnished during the assessment proceedings.

Order pronounced in the open court on 03/06/2026.

Sd/- Sd/- (SUDHIR PAREEK) (DR. MITHA LAL MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 03/06/2026. Nimisha Sr. PS True Copy Copies to : (1) The appellant. (2) The respondent. (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File BY ORDER,